A shortage of houses on the market is driving up prices Photograph: Toby Melville/Reuters

Homeowners who live outside London and the south-east must wonder what on Earth is going on. According to the Nationwide building society's latest figures, house prices in the UK have risen by more than 10% during the past year, but homeowners outside Greater London have seen little of that reported action: quarterly prices reported in March actually dropped by 0.4% in the north-west.

House price indices are unrepresentative of what is happening in the UK as a whole as they are distorted, in part, by big rises in the capital.

At the top of the road where I live in south London, Shanly Homes has been working on a new development of 10 "town houses".

The development – on a site which used to comprise one large house and a tennis court – has been going on for a couple of years now, right through the house price crash.

For a while I thought Shanly might give up on the project: after all, no one was buying houses, especially new builds, which tend to drop in value as soon as you move in.

But the developer plugged on, and no wonder: this spring the first of the "contemporary four-and five-bedroom houses with parking and gardens in the heart of Clapham" were put on the market for £2,250,000 and £2,300,000. The site is on a busy road and right next door to a petrol station. The gardens that go with the houses provide just enough space to swing a cat.

Although the neighbours are spluttering about who on earth would pay more than £2m to live there, two are already under offer.

It's not just the new ones with five bedrooms that are selling, either. Houses along my road – terraced, with four bedrooms including an attic conversion – were going for about £600,000 18 months ago. Now two are under offer for more than £900,000. That's a 50% increase in 18 months – this is madness.

Lucian Cook, who is director of residential research at estate agents Savills, says prices in south-west London have led the "recovery", which has been caused by equity-rich buyers having few houses to choose from.

But more and more stock is coming onto the market now, and bonuses (enjoyed by many of the inhabitants of this part of London) are lower than usual and in many cases comprise shares rather than cash. People are still losing their jobs and accepting salary cuts.

All you need now is a couple of interest rate increases, and house price rises will become a thing of the past.